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Speaker 1: Bloomberg Audio Studios, Podcasts, radio news.

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Speaker 2: This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along

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Speaker 2: with Lisa Bromwitz and Amrie Hordert. Join us each day

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Speaker 2: for insight from the best in markets, economics, and geopolitics

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Speaker 2: from our global headquarters in New York City. We are

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Speaker 2: live on Bloomberg Television weekday mornings from six to nine

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Speaker 2: am Eastern. Subscribe to the podcast on Apple, Spotify or

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Speaker 2: anywhere else you listen, and as always on the Bloomberg

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Speaker 2: Terminal and the Bloomberg Business app. We'll begin this out

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Speaker 2: with stock sliding as the tech sell off deepens. Judian

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Speaker 2: and Manual I've ever core remains constructive writing. We'll remain

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Speaker 2: steadfastly bullish, led by a I names and themes. Stocks

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Speaker 2: remain on course for seventy seven point fifty, and the

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Speaker 2: nine K ballcase is still operational. Julian joins us now

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Speaker 2: for more. Julian, good morning, Good Mornings. That's somewhat contrarian

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Speaker 2: after the few days we've had.

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Speaker 3: Well, first I want to say is, given the sports intra,

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Speaker 3: we should start talking about MESSI again, which we were

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Speaker 3: doing prior to the time.

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Speaker 4: It makes some SI for that a little bit like fine, fine.

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Speaker 3: So I liken this to the beginning of the year

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Speaker 3: when you started to have the accumulated worries around software

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Speaker 3: and the initial concerns around debt, which obviously the debt

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Speaker 3: pile has gotten much larger, which earnings are supporting, and

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Speaker 3: you got this intense negativity around technology stocks, and we

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Speaker 3: felt like we were contrarians coming into the beginning of

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Speaker 3: twenty twenty six sticking with the call, and frankly, you know,

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Speaker 3: we saw the progression into the most hedged position we

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Speaker 3: had ever seen in thirty years at the lows in March,

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Speaker 3: and the market isn't hedged to that degree, to be sure, but.

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Speaker 5: The skepticism is there.

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Speaker 3: And frankly, when you think about it, you're just sort

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Speaker 3: of transitioning this wall of worry away from the maligne

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Speaker 3: of of high oil and into the potential concerns around

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Speaker 3: supply and less transparent monetary.

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Speaker 2: So you say, the bill case is operational. Yet we

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Speaker 2: started the program by pointing out a couple of names,

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Speaker 2: the likes of Microsoft and Meta deep into baar markets. Now,

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Speaker 2: can you have nine K on the S and P

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Speaker 2: operational so to speak? Without those names participating in any way,

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Speaker 2: shape or form.

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Speaker 3: Mathematically you can't, okay, And when you look at it,

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Speaker 3: the chip names, you know, have done a great deal

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Speaker 3: of the heavy lifting. You will need a refreshed attitude

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Speaker 3: towards the mag seven and we think that that comes

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Speaker 3: in time. And if you look at it, over the

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Speaker 3: course of this bull market, now almost three years old,

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Speaker 3: there have been certain periods of time where essentially earnings

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Speaker 3: and price have you know, caught up to each other.

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Speaker 3: And we think that's one of these periods in these

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Speaker 3: larger aimes, and that you will have price start to

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Speaker 3: advance once more.

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Speaker 1: What will it take for people to have a refreshed

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Speaker 1: attitude about the hyperscalers.

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Speaker 3: It will likely be a little bit more churn, a

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Speaker 3: little bit more volatility, a little bit more negativity, and

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Speaker 3: then ultimately.

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Speaker 4: The proof of the pudding.

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Speaker 3: That was the proof of the pudding that caused this

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Speaker 3: furious rally to begin with. In April and May, earnings

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Speaker 3: you're going to see good earnings.

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Speaker 1: Are we starting to see the beginnings of pushback from

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Speaker 1: the adults in the room, the bond investors, saying hold

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Speaker 1: on a second, and we're talking about this particularly with SpaceX,

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Speaker 1: not necessarily leading off the entire selloff, but not helping

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Speaker 1: exactly this company that just ipo'd coming back to mark

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Speaker 1: of twenty billion dollars, it's investment grade even though it's

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Speaker 1: been burning cash and has a prospect of getting to

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Speaker 1: the moon literally and beyond how much is this the

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Speaker 1: beginning of something that's important to watch.

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Speaker 3: Well, again, this is the point where we will figure

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Speaker 3: out how supply and demand interact, because clearly the message is,

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Speaker 3: well you iPod and maybe you should have waited at

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Speaker 3: least till you got included in the Nasdaq one hundred

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Speaker 3: before marketing debt. But here we are, and to us again,

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Speaker 3: when you look at the market action, it's just a

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Speaker 3: much more significant, volatile churn. And again with that name

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Speaker 3: in particular, you're still comfortably above the IPO price. So

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Speaker 3: I mean, you know, they may send people to the

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Speaker 3: moon and to Mars, but stocks don't go to the

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Speaker 3: moon and Mars indefinitely.

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Speaker 2: For now, at least we've done another four percent in

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Speaker 2: the pre market headline, I'll be talked about small caps

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Speaker 2: record highs. What's going on there? The small caps move,

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Speaker 2: which is where the air performance has been so fine

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Speaker 2: y today.

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Speaker 3: So during the course of the entirety of this bull market,

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Speaker 3: small caps have been the default short for active managers,

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Speaker 3: and that really kind of faded as the year started again,

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Speaker 3: partly is a function of the concern around technology that

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Speaker 3: started the year, but more preciently about this fact that

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Speaker 3: we may be having agitation about where the short end

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Speaker 3: of the interest rate curve is going to go.

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Speaker 4: But guess what, the long end is.

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Speaker 3: Incredibly well anchored around four point fifty and oh, by

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Speaker 3: the way, the labor market is it's suggesting, and all

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Speaker 3: of those are positives for small caps, as is the

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Speaker 3: price of oil. And then last point here is that

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Speaker 3: again this tends to be around the Russell rebalance, the

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Speaker 3: time where you get your maximum small cap out performance.

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Speaker 3: We wouldn't be surprised by a little bit of reversion

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Speaker 3: as the third.

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Speaker 2: Quarter starts IBM and the pre mar ket by four percent.

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Speaker 2: We have a new whale in the tech sector and

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Speaker 2: it's the US goverment. How are you thinking about that?

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Speaker 3: Well, look again, there's the concept of picking stocks and

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Speaker 3: getting national champions, and you've seen it with a number

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Speaker 3: of names, you know, very old line US technology names.

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Speaker 6: You know.

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Speaker 3: In the bigger picture, anointing winners and losers has its

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Speaker 3: own issues in terms of the government level. But frankly,

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Speaker 3: the fact that the government is, as you know, forcefully

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Speaker 3: behind the Ai revolution as it is is a positive

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Speaker 3: in our mind for investors broadly.

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Speaker 7: Well, we see this administration do it with Intel and

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Speaker 7: a number of rare earth mineral companies. Do you just

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Speaker 7: have a list of potentially the next company the US

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Speaker 7: government might take a stake in, and then it's the stock.

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Speaker 4: Is off to the moon.

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Speaker 3: We did that a number of months ago. I would

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Speaker 3: say it was very well received and certainly work. But

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Speaker 3: again I think we're far enough along. And again this

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Speaker 3: is also part of the investment problem in general, that

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Speaker 3: when you look at the major sectors, it's now fifty

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Speaker 3: eight percent of the S and P five hundred, the

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Speaker 3: top ten stocks forty percent of the S and P

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Speaker 3: five hundred. That there is a little bit of psychological

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Speaker 3: crowding out in trying to find companies with smaller market caps.

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Speaker 7: The heavy hand of the US government. Does it distort

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Speaker 7: the market?

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Speaker 3: Classical economics would tell you that it does, okay, But

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Speaker 3: again I go back to this idea that the bigger

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Speaker 3: picture in terms of you know, making sure that the

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Speaker 3: US is front foot versus the rest of its global

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Speaker 3: competitors in technology is a positive.

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Speaker 1: There's also a sense that there's a rolling ball of

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Speaker 1: money that is racing to the next corner, the next

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Speaker 1: big thing that could potentially take off as this build

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Speaker 1: out and tech continues, and that people aren't sure what

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Speaker 1: the ultimate goal is with the ultimate form of AI

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Speaker 1: is going to take in terms of the way its

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Speaker 1: displayed throughout economies. At the same time, it's just racing

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Speaker 1: to get there. Whether we see it in eske Heinex

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Speaker 1: and Samsung or whether we see it in the semiconductors

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Speaker 1: in the United States. How does that destabilize markets? I mean,

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Speaker 1: how much is that something that you're watching?

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Speaker 3: Well, it just shows you that volatility works both to

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Speaker 3: the upside and the downside. And actually for us, this

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Speaker 3: is very interesting And the reason we don't think we're

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Speaker 3: in a bubble right now is because for the last

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Speaker 3: six weeks, clients have been asking how do we hedge AI?

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Speaker 3: How do we deal with the fact that the AI

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Speaker 3: trade is everything and now dominates emerging markets. It's changed

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Speaker 3: the relationship of gold is a hedge. It's changed the

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Speaker 3: relationship of bonds as a hedge versus stocks, And our

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Speaker 3: answer is, actually, this is a very interesting time.

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Speaker 4: On a day to.

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Speaker 3: Day basis, there's a larger universe of stocks in the

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Speaker 3: S and P five hundred that are moving inversely to

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Speaker 3: the S and P day in and day out. We

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Speaker 3: call them negative beta names that really act as a

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Speaker 3: portfolio diversifier.

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Speaker 4: People are looking.

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Speaker 3: For reasons to hedge yet stay invested.

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Speaker 1: Are stocks the best hedge to stocks versus bonds being

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Speaker 1: a good hedge to stocks in.

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Speaker 3: This environment, well, in an environment where we're concerned about

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Speaker 3: higher inflation broadly on a sustained basis, history tells you

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Speaker 3: that stocks are the best.

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Speaker 4: Can you disrupt those stocks? Where do we find those stocks?

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Speaker 3: They are across you know, an entirety of industries. Energy obviously,

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Speaker 3: in the narrative of this entire year has basically been

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Speaker 3: energy moving inversely to the S and P five hundred.

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Speaker 3: But you see it in consumer names, you see it

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Speaker 3: in utilities, and of all the strange places you actually

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Speaker 3: see it and select financials. In our mind, that is

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Speaker 3: definitely different behavior.

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Speaker 4: Yeah, what do you make of that?

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Speaker 2: The bank's troid because thin were meant to be the

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Speaker 2: big beneficiaries of all of this technology.

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Speaker 3: I think again what it is is sort of a preference.

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Speaker 3: I remember years ago at a different shop, our oil

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Speaker 3: analyst said to me, in the midst of a massive

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Speaker 3: rally in oil, when are my stocks going to start rallying?

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Speaker 3: And I said, they're going to start rallying when they

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Speaker 3: start selling technology. Okay, And so when I think of financials,

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Speaker 3: that's likely going to be the outcome when we take

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Speaker 3: some chip. If you look at yesterday, financials traded very

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Speaker 3: well in a negative tech tape, and that's kind of

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Speaker 3: the narrative.

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Speaker 2: Stay with us multiple index surveilance coming up after this.

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Speaker 2: Let's talk about a different asset, clous Let's talk about crew.

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Speaker 2: The President announcing funds from lifted and rounding and sanctions

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Speaker 2: will be put in scrow to be used exclusively to

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Speaker 2: buy us goods.

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Speaker 6: If the sanctions go out, money is going to be

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Speaker 6: put into this country. All that money's coming back and

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Speaker 6: the former purchases of food which they desperately needed. Can

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Speaker 6: you assure that you're radios won't use profits from oil

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Speaker 6: sales to rebuild the new Sargy.

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Speaker 5: Well, they're not supposed to be doing that.

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Speaker 6: So I will say, but they're supposed to use money

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Speaker 6: to buy food for their people.

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Speaker 2: Roun now has sixty days to sound oil on the

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Speaker 2: international market. Crewed this morning seventy seven on Brent, seventy

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Speaker 2: three on WTI. Joining us now to discuss the former

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Speaker 2: White House senior advisor and partner at TWT Group, Amos Hawkstein.

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Speaker 2: Amus will start Broadway. We can get into details. What's

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Speaker 2: your reaction been to how this has played out over

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Speaker 2: the last week.

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Speaker 8: Well, quite remarkable because the MoU in itself is little

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Speaker 8: more than really I mean, it's almost like a surrender.

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Speaker 8: I mean, if you think about where we started a

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Speaker 8: few months ago, and what policy has been for the

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Speaker 8: last several decades, and where we are today, we have

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Speaker 8: basically said, for sixty days, we are removing massive amounts

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Speaker 8: of sanctions off oil, gas and petrochemicals and refined products.

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Speaker 8: You can sell it anywhere in dollars, which haven't done

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Speaker 8: that in many, many years. They can also get some

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Speaker 8: access to unfrozen their own unfrozen assets, you know, six

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Speaker 8: to twelve billion dollars depending on which report you here.

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Speaker 8: They get other benefits, and all they have to do

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Speaker 8: was to open the straits and agree to talk. So

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Speaker 8: we haven't actually agreed to anything on the nuclear but

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Speaker 8: we have agreed that missile ballistic missile program and support

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Speaker 8: for proxy terrorist groups in the region are not on

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Speaker 8: the table and not part of the negotiations. And we've

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Speaker 8: given them the huge political win of now being the

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Speaker 8: decision makers in Lebanon, which is quite astonishing. So this

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Speaker 8: is what we've done. We've given them all. This whole

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Speaker 8: document is incentives and agreements to give an things with

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Speaker 8: the hope that we'll get something out of it at

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Speaker 8: some point during the sixty days. And the clip that

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Speaker 8: you showed a little bit earlier with the president talking

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Speaker 8: about buying food and medicine, I think he's confusing two

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Speaker 8: different types of revenues. The food and medicine is really

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Speaker 8: I think what they're trying to do with the unfrozen

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Speaker 8: assets in cutter the six to twelve billion dollars the

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Speaker 8: oil revenues. They can sell and do with that revenue

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Speaker 8: whatever they want.

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Speaker 7: When it comes to that oil revenue, almost where do

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Speaker 7: you think your run and crude will be going? Is

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Speaker 7: this just legitimize the Chinese buyers or will they actually

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Speaker 7: find new customers?

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Speaker 5: I assume that.

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Speaker 8: At first it will just be the Chinese customers with legitimacy,

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Speaker 8: and probably Indian consumers as well, and then the rest

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Speaker 8: of the market will wait and see and to see

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Speaker 8: how long this lasts. Because the worst thing is you

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Speaker 8: unsanction something, the Americans and the Iranians get into some tiff,

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Speaker 8: you know, some a few a week from now, three

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Speaker 8: weeks from now, five week from now, and suddenly what

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Speaker 8: you bought that was unsanctioned is suddenly sanctioned again. So

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Speaker 8: I think people will take some time to figure that out,

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Speaker 8: except of course, some trading houses that will buy a

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Speaker 8: whole bunch of Iranian crude and blend it and then.

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Speaker 5: They'll be able to sell wherever they want.

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Speaker 8: So I think you're going to see sort of a broadening,

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Speaker 8: but it'll be a gradual broadening.

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Speaker 7: I know they're not a monolith, but do you have

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Speaker 7: an understanding of where the GCC is on this, given

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Speaker 7: the fact that it is pretty remarkable, as you said,

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Speaker 7: to see this U turn from this administration to allow

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Speaker 7: Irani and oil to legally hit the market. We haven't

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Speaker 7: seen this in four decades.

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Speaker 8: Yeah, this is again. I think that you're right, the

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Speaker 8: golf is not a monolith. Clearly the political winner in

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Speaker 8: the Golf is Cutter, where they are setting, to some degree,

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Speaker 8: setting American policy. They're in charge of American Middle East

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Speaker 8: policy right now in quite an extraordinary way. They are

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Speaker 8: quite gifted at this, and I think that there are

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Speaker 8: others in the Gulf who are looking at this and saying,

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Speaker 8: wait a minute, we didn't like, we don't really like

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Speaker 8: Cutter foreign policy, and now it's running American foreign policy.

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Speaker 8: Iran was a threat to us, the United States convinced

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Speaker 8: us to join them in conflict. Now they're emerging stronger

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Speaker 8: politically at home, right I mean, you can't imagine anybody

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Speaker 8: going out and demonstrating against the regime right now. Help

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Speaker 8: is definitely not on the way, and so they're left

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Speaker 8: with a neighbor next door that is angry and vengeful

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Speaker 8: and is going to be very well funded. And if

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Speaker 8: they are very well funded, you're talking about it. If you

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Speaker 8: talk about their sales on oil sales alone and petrochemicals,

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Speaker 8: you're probably talking about revenues of about a billion a week.

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Speaker 8: So those countries in the Gulf are are looking at

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Speaker 8: this with great concern, and they're going to have to

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Speaker 8: invest in their own defense in the long term, thinking

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Speaker 8: that the United States has become extremely short term thinking.

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Speaker 8: You know, that's kind of how they view us at

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Speaker 8: the moment.

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Speaker 1: So we're looking at oil prices because that's what the

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Speaker 1: market is looking at, and there are somewhat agnostic, as

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Speaker 1: John has mentioned many times about exactly how oil is

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Speaker 1: getting from one place to another and the potential geopolitical implications,

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Speaker 1: at least in the short term, saying, look, at least

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Speaker 1: barrels of oil are going through the strait of removes.

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Speaker 1: Do you think that this is an accurate reflection of

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Speaker 1: the potential risk of an additional closure? Because if there

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Speaker 1: is true control buy orn over the strait of removes,

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Speaker 1: should there be a higher premium to potentially offset against

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Speaker 1: the risk of something like this happening?

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Speaker 8: Again, Look, I think if we were talking about five

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Speaker 8: years ago, ten years ago, yes you would talk about

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Speaker 8: risk premiums and so on.

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Speaker 5: But the market at the moment is.

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Speaker 8: Basically saying, I have a lot of news that I

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Speaker 8: want to look at on the tech side, how much

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Speaker 8: CAPEX is coming in on AI and data centers and

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Speaker 8: blockbuster IPOs and space. That's what I want to focus on.

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Speaker 8: So energy really is judge.

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Speaker 5: Us do I have?

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Speaker 8: Is this something that's going to drag me down or not?

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Speaker 8: If it's not going to drag me down, I don't

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Speaker 8: want to talk about it. Everything is fine. I don't

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Speaker 8: want to hear people tell me about risk premiums. And

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Speaker 8: so that's where we are reality wise in the market.

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Speaker 8: Do we have a risk in of course, because the

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Speaker 8: one thing that's come out of this conflict is Iran.

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Speaker 8: As I said on your show a few weeks ago

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Speaker 8: before this agreement, No matter how this war ends, no

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Speaker 8: matter what agreement we reach, Iran sees it as they

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Speaker 8: control the Straits, and control of the straits does not

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Speaker 8: necessarily mean a toll. It could just as well mean

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Speaker 8: I decide that tankers need to give me forty eight

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Speaker 8: hours notice. I can decide that I don't like a

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Speaker 8: certain company. Your tankers are not going through those kinds

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Speaker 8: of things. So yes, there's a risk, but I don't

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Speaker 8: think the market is there to look at it.

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Speaker 5: The second piece of that.

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Speaker 8: Is, while oil prices are coming down, there's still you know,

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Speaker 8: Brent's still at seventy seven, WTI at seventy three in

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Speaker 8: December of this you know, this past year of December January,

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Speaker 8: before the winds of war started blowing, we were at

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Speaker 8: fifty six to sixty dollars.

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Speaker 5: So we're still.

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Speaker 8: Trading at a significant premium to where we were before

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Speaker 8: the wins of war in December. So I think if

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Speaker 8: the prices start coming down further, which I think they will,

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Speaker 8: at some point you'll start saying, okay, can they really

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Speaker 8: go back to where they were in December? And that's

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Speaker 8: where we'll see probably a five to ten dollars risk

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Speaker 8: premium that will be that will be put into the market.

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Speaker 4: Even Amos managed to get the.

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Speaker 1: Tech tried in the you know well, I mean, I

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Speaker 1: think that there's a bit of frustration at least when

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Speaker 1: people look at the geopolitics saying this actually matters tremendously,

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Speaker 1: but they can't get anyone to care because everyone's saying, ooh.

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Speaker 2: Space almost I'd love to find a word with you

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Speaker 2: on that. There was some discussion that the rebuilt effort

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Speaker 2: would be so costly, so expensive for nations across the Gulf,

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Speaker 2: that they'd be distracted from spending all this money on

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Speaker 2: tech on AI. When there has been some excitement, particularly

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Speaker 2: over the last year about softign A on the amount

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Speaker 2: investment that would come from that particular part of the world.

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Speaker 2: What should we be tracking now, where's the money going?

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Speaker 2: Where isn't it going?

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Speaker 5: So I never agreed with that.

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Speaker 8: With that notion, I think countries like you e And

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Speaker 8: Saudi and others are really looking at tech as a

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Speaker 8: long term diversification away from oil in their national economy

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Speaker 8: and budgets that has become more acute, not less. They're

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Speaker 8: going to be spending money one on diversification of their

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Speaker 8: energy sector away from the Strait of Hormuz, so building

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Speaker 8: out infrastructure, which sounds expensive but really isn't. It's a

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Speaker 8: few billion dollars here and there to build out this infrastructure.

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Speaker 8: And the second piece is to double down on their

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Speaker 8: investments in tech, and most of that is going to

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Speaker 8: be in the United States, because where else are you

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Speaker 8: going to invest? There's a ceiling for them in how

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Speaker 8: much they can invest.

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Speaker 5: In China.

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Speaker 8: They're continuing to invest there, but there's a ceiling.

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Speaker 5: Europe is non existent.

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Speaker 8: Or there's a little bit of play here and there,

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Speaker 8: but it's really small amounts of dollars, and so the

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Speaker 8: bulk of it will have to come to the United States.

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Speaker 8: And I got to say I've been to UA in Saudi.

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Speaker 8: The buildout that's happening there is going to continue to

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Speaker 8: expand the question will be not how much they want

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Speaker 8: to spend. What will companies, American companies, European companies want

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Speaker 8: to build data centers in the golf or will they

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Speaker 8: be more hesitant as a result of this. But I

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Speaker 8: think you're going to see more money coming in to

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Speaker 8: invest in this sector, and I think it's going to

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Speaker 8: be mostly in the tech sector, some of it in healthcare,

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Speaker 8: and other in sports and other entertainment sectors around the world,

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Speaker 8: but mostly again, I think in the United States.

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Speaker 4: Stay with us.

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Speaker 2: More Bloomberg surveillance coming up after this. Let's move on

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Speaker 2: to talk about tech SpaceX the ill and muscled companies

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Speaker 2: shedding roughly four hundred billion dollars in Monday session alone,

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Speaker 2: the second largest single session drop in market value on record.

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Speaker 2: Matt Wiheiler of Wellington Management writing, it's unique in that

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Speaker 2: it's one of the few companies that can talk about

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Speaker 2: a future that doesn't exist and get credit for it

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Speaker 2: in their price. This is exactly how test the stock behaves.

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Speaker 2: Joined to snaff and walmac and wanting good to see

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Speaker 2: it good morning.

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Speaker 4: Thanks for having me. Does that make it difficult to

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Speaker 4: bet against the al Musk?

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Speaker 9: It definitely makes it difficult to bet against Elon Musk.

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Speaker 9: When I think about the companies out there that can

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Speaker 9: go public and be trading at a two trillion dollars

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Speaker 9: plus market cap, there are very few that could do

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Speaker 9: it with the current financial stats that SpaceX is delivered.

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Speaker 2: You check in the story how close are we to

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Speaker 2: the reusable technology the advancements that we need to justify

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Speaker 2: this market cap.

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Speaker 9: You know, I'm not a huge SpaceX expert, but what

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Speaker 9: I think they have delivered is reusable rockets at scale,

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Speaker 9: and I think they've proven a lot of that, which

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Speaker 9: is in fulfillment of the vision, with the next step

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Speaker 9: being vision of having orbital data centers.

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Speaker 4: And when you look at the analyst reports and you.

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Speaker 9: Look at how SpaceX is trading, obviously a lot of

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Speaker 9: embedded value in that orbital data center story.

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Speaker 1: Massiosha, son of SoftBank, came out overnight and was talking

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Speaker 1: about how he doesn't see data centers in space as

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Speaker 1: the likely path of traveling said, it's really about the

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Speaker 1: next couple of years and who wins the data center

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Speaker 1: build out on Earth as an investor in anthropic someone

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Speaker 1: who has been a participant in this whole space, in

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Speaker 1: this race for AI.

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Speaker 4: Do you agree with him?

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Speaker 9: I do think there is a question around the long

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Speaker 9: term viability of orbital data centers. And I am not

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Speaker 9: an expert when it comes to the physics, the math

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Speaker 9: and the numbers of getting these things up in the sky.

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Speaker 9: But I think that the Softbaing point is right, which

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Speaker 9: is today we are in a compute constrained environment for inference.

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Speaker 9: There is more demand for this inference, compute for AI

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Speaker 9: analysis and AI workloads, and there is supply of that,

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Speaker 9: and that ultimately is what's driven a lot of the

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Speaker 9: performance in the market today, as we've seen the chip

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Speaker 9: maker's rally, as we've seen companies in the AI space

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Speaker 9: in the public market like Nvidia, like Microsoft.

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Speaker 4: Like Facebook.

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Speaker 1: Yeah, but is there's starting to be some pushback in

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Speaker 1: terms of the cost of that buildout of capacity. Torsenk

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Speaker 1: I was mentioning him earlier of Apollo talked about AI

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00:22:51,640 --> 00:22:53,800
Speaker 1: as a risk and says, what happens if companies start

442
00:22:53,800 --> 00:22:56,960
Speaker 1: limiting their token budgets meaningfully because they're only seeing weak

443
00:22:57,000 --> 00:22:58,800
Speaker 1: return on investment, and this is something that people are

444
00:22:58,840 --> 00:23:02,040
Speaker 1: pointing to the idea that tokens are getting restricted. How

445
00:23:02,119 --> 00:23:03,919
Speaker 1: much is this a risk factor for you as an

446
00:23:03,960 --> 00:23:05,840
Speaker 1: investor in some of these top names.

447
00:23:05,920 --> 00:23:08,680
Speaker 9: I mean, it's definitely something we think about, but ultimately,

448
00:23:08,680 --> 00:23:10,159
Speaker 9: I think you have to look at two things. The

449
00:23:10,160 --> 00:23:11,960
Speaker 9: first thing you have to look at is what the

450
00:23:12,119 --> 00:23:15,920
Speaker 9: companies purchasing and spending this capital are saying, and whether

451
00:23:15,960 --> 00:23:19,480
Speaker 9: it's SpaceX with their recent bond issue and their IPO

452
00:23:20,000 --> 00:23:23,320
Speaker 9: or Google with their recent equity rays, these companies are

453
00:23:23,320 --> 00:23:26,040
Speaker 9: saying that there is ROI here. It is sufficient for

454
00:23:26,119 --> 00:23:29,040
Speaker 9: me to raise additional funds to go do these buildouts.

455
00:23:29,200 --> 00:23:32,520
Speaker 9: And that's not because they are necessarily fueling others. It's

456
00:23:32,520 --> 00:23:35,000
Speaker 9: also they see internal demand for this. So I think

457
00:23:35,000 --> 00:23:36,399
Speaker 9: that's one thing you have to look at. And I

458
00:23:36,400 --> 00:23:38,800
Speaker 9: think the second thing you have to think about is

459
00:23:38,800 --> 00:23:42,720
Speaker 9: is perhaps they're over spending in tokens today, almost certainly.

460
00:23:43,160 --> 00:23:46,560
Speaker 9: But does that mean that AI does not deliver ROI

461
00:23:46,640 --> 00:23:48,000
Speaker 9: across a wide.

462
00:23:47,800 --> 00:23:48,800
Speaker 4: Variety of use cases.

463
00:23:48,840 --> 00:23:51,159
Speaker 9: I definitely don't think so, and I think that the

464
00:23:51,520 --> 00:23:54,040
Speaker 9: proof will be in the years that play out. Does

465
00:23:54,080 --> 00:23:57,240
Speaker 9: Anthropic end up going from I don't know, two thousand

466
00:23:57,240 --> 00:23:59,520
Speaker 9: percent year over year growth like they've been tracking today,

467
00:24:00,280 --> 00:24:02,240
Speaker 9: you know, five hundred or seven hundred percent.

468
00:24:02,280 --> 00:24:06,159
Speaker 1: But Microsoft has recently tap deep seek Chinese models.

469
00:24:05,880 --> 00:24:07,320
Speaker 4: To try to offset some of the cost.

470
00:24:07,480 --> 00:24:09,000
Speaker 1: Why is that not the path of travel for a

471
00:24:09,040 --> 00:24:09,920
Speaker 1: lot of these companies.

472
00:24:10,000 --> 00:24:12,359
Speaker 9: I think that when you think about how the economics

473
00:24:12,400 --> 00:24:15,520
Speaker 9: will flow in the model builders themselves, I think it's

474
00:24:15,560 --> 00:24:19,200
Speaker 9: our opinion, or certainly my opinion, that the frontier model

475
00:24:19,280 --> 00:24:22,760
Speaker 9: is the open AI, the anthropics, the leading models out

476
00:24:22,760 --> 00:24:25,000
Speaker 9: there will capture a lot of the revenue. But does

477
00:24:25,040 --> 00:24:27,560
Speaker 9: that mean that everything needs to run at the frontier

478
00:24:27,600 --> 00:24:30,800
Speaker 9: model level? Absolutely not. Is there a role for deep seek?

479
00:24:30,880 --> 00:24:33,439
Speaker 9: Is there a role for open source? Absolutely? And I

480
00:24:33,440 --> 00:24:35,480
Speaker 9: think that's how the market will bifurcate. Is there'll be

481
00:24:35,520 --> 00:24:38,199
Speaker 9: a lot of value in the large language models at

482
00:24:38,200 --> 00:24:41,320
Speaker 9: the leading edge, and they'll also be valued accrude to

483
00:24:41,640 --> 00:24:43,879
Speaker 9: the open source and Chinese models.

484
00:24:43,920 --> 00:24:46,120
Speaker 7: When we look at SpaceX. So who's really the competitor

485
00:24:46,200 --> 00:24:48,399
Speaker 7: right now? Is it the anthropics or is it the

486
00:24:48,400 --> 00:24:49,080
Speaker 7: blue origins.

487
00:24:49,680 --> 00:24:52,959
Speaker 9: I think it's probably more the blue origins. And if

488
00:24:52,960 --> 00:24:55,560
Speaker 9: you actually look at the economics of the business today

489
00:24:55,640 --> 00:24:57,560
Speaker 9: and you look at how much capital the company is

490
00:24:57,600 --> 00:25:00,560
Speaker 9: bringing in a lot of their competition is actually the

491
00:25:00,600 --> 00:25:03,000
Speaker 9: core we even hyperscalers of the world. If you look

492
00:25:03,000 --> 00:25:07,480
Speaker 9: at their economic agreements with Anthropic and with Google that

493
00:25:07,520 --> 00:25:11,040
Speaker 9: accounts for almost twenty four billion dollars of annualized revenue

494
00:25:11,240 --> 00:25:13,440
Speaker 9: that is coming from just leasing out their data center.

495
00:25:13,520 --> 00:25:14,600
Speaker 4: Compute might just find me.

496
00:25:14,640 --> 00:25:17,359
Speaker 2: You're an investor in Anthropic, can make a your reaction

497
00:25:17,520 --> 00:25:21,959
Speaker 2: to how you'd characterize the messaging coming from leadership Anthropic,

498
00:25:22,200 --> 00:25:24,760
Speaker 2: which some people say is AI doomerism and it is

499
00:25:24,800 --> 00:25:27,760
Speaker 2: not helpful to the whole landscape right now, what's your

500
00:25:27,880 --> 00:25:28,400
Speaker 2: take on it?

501
00:25:28,760 --> 00:25:32,560
Speaker 9: My take on that is that it may be perceived

502
00:25:32,560 --> 00:25:34,920
Speaker 9: as numerism, But if you look at how this administration

503
00:25:35,280 --> 00:25:36,879
Speaker 9: is acting, and if you look at some of the

504
00:25:36,920 --> 00:25:40,840
Speaker 9: reports that came out yesterday, perhaps the dumerism isn't as

505
00:25:40,960 --> 00:25:43,480
Speaker 9: extreme as people had thought. I think there was reporting

506
00:25:43,560 --> 00:25:47,560
Speaker 9: yesterday that perhaps the latest Anthropic model was able to

507
00:25:47,600 --> 00:25:50,479
Speaker 9: breach some classified systems, and that is what resulted in

508
00:25:50,520 --> 00:25:54,280
Speaker 9: the administration putting a lockdown on the fable release that

509
00:25:54,359 --> 00:25:55,160
Speaker 9: Anthropic had.

510
00:25:55,440 --> 00:25:57,080
Speaker 4: Now I mentioned when this goes pumplic, you'll be sun

511
00:25:57,119 --> 00:25:58,280
Speaker 4: of the stock. Right.

512
00:25:58,359 --> 00:26:00,359
Speaker 2: It's that fat to say you hold Anthropic now when

513
00:26:00,400 --> 00:26:02,480
Speaker 2: the stock goes public, we hold anthropic still.

514
00:26:02,640 --> 00:26:03,880
Speaker 4: We as a firm, as.

515
00:26:03,800 --> 00:26:06,280
Speaker 9: A one point three trillion dollar asset manager, have lots

516
00:26:06,320 --> 00:26:08,800
Speaker 9: of different pockets of capital, some of which may be

517
00:26:08,840 --> 00:26:11,320
Speaker 9: selling anthropics, some of which may be bokay.

518
00:26:11,119 --> 00:26:12,560
Speaker 4: So complicated, complicated.

519
00:26:12,560 --> 00:26:14,159
Speaker 2: I'm trying to understand how you think about this in

520
00:26:14,160 --> 00:26:16,359
Speaker 2: the future, because clearly now in private markets, it's got

521
00:26:16,359 --> 00:26:19,119
Speaker 2: a great valuation. It's come in public, there's a lot

522
00:26:19,160 --> 00:26:21,000
Speaker 2: of stories that are the hype around it. And what

523
00:26:21,080 --> 00:26:23,240
Speaker 2: helps the hype sometimes are these kind of declarations that

524
00:26:23,240 --> 00:26:25,160
Speaker 2: it's going to wipe out thirty percent of white collar work.

525
00:26:25,359 --> 00:26:27,280
Speaker 2: You don't have to deal with the regulatory response just

526
00:26:27,320 --> 00:26:30,000
Speaker 2: now because they've created so much value in private markets.

527
00:26:30,000 --> 00:26:32,600
Speaker 2: You've been a part of that value creation. How are

528
00:26:32,640 --> 00:26:35,280
Speaker 2: you thinking about the prospect of regulation down the road.

529
00:26:35,359 --> 00:26:37,040
Speaker 2: Is that a story you want to navigate with that

530
00:26:37,119 --> 00:26:38,800
Speaker 2: company or something you want to take your hands away

531
00:26:38,840 --> 00:26:40,080
Speaker 2: and say you're on your own now.

532
00:26:40,200 --> 00:26:40,840
Speaker 4: Thanks all to right.

533
00:26:41,000 --> 00:26:43,159
Speaker 9: Well, I think it's definitely a complicated piece of the

534
00:26:43,200 --> 00:26:45,800
Speaker 9: mosaic across all the AI landscape, and I think the

535
00:26:45,840 --> 00:26:49,840
Speaker 9: trade off ultimately comes down to how much regulatory flex

536
00:26:49,880 --> 00:26:52,760
Speaker 9: does the government want to have in this space versus

537
00:26:52,840 --> 00:26:56,240
Speaker 9: how much free market and leadership position we want to take.

538
00:26:56,440 --> 00:26:58,639
Speaker 9: And I think that's the tension we're seeing today. And

539
00:26:58,680 --> 00:27:00,199
Speaker 9: if you look back a week ago, I think there

540
00:27:00,240 --> 00:27:03,520
Speaker 9: was some reporting that perhaps the US government may start

541
00:27:03,520 --> 00:27:05,880
Speaker 9: taking positions in some of these companies like they did

542
00:27:05,960 --> 00:27:09,480
Speaker 9: at Intel, and I think that potentially could be a route,

543
00:27:09,520 --> 00:27:10,240
Speaker 9: although I don't know.

544
00:27:10,480 --> 00:27:13,360
Speaker 2: Do political realities in your mind dictate one or the other.

545
00:27:13,800 --> 00:27:15,679
Speaker 2: Is it easier to say in China we're going to

546
00:27:15,680 --> 00:27:18,119
Speaker 2: be market leaders and focus on that, and in the

547
00:27:18,200 --> 00:27:20,040
Speaker 2: US you just have to face the political reality that

548
00:27:20,080 --> 00:27:22,119
Speaker 2: you need to control this thing because the people they

549
00:27:22,119 --> 00:27:23,840
Speaker 2: are voting are the people losing their jobs.

550
00:27:24,040 --> 00:27:26,680
Speaker 9: Well, I think that if you can trust the China

551
00:27:26,720 --> 00:27:29,720
Speaker 9: approach versus the US approach, I think you can mandate

552
00:27:29,720 --> 00:27:31,280
Speaker 9: that we're going to be a leader and that we

553
00:27:31,320 --> 00:27:32,960
Speaker 9: are going to win there, but that doesn't mean that

554
00:27:33,000 --> 00:27:35,159
Speaker 9: you deliver on being the winner in leading there. And

555
00:27:35,160 --> 00:27:37,560
Speaker 9: I think that's what makes the US development of AI

556
00:27:37,760 --> 00:27:41,080
Speaker 9: quite unique is that we have multiple free market economy

557
00:27:41,080 --> 00:27:43,880
Speaker 9: participants trying to build the best models, and so far

558
00:27:44,280 --> 00:27:46,000
Speaker 9: that have resulted in US having.

559
00:27:45,760 --> 00:27:47,040
Speaker 4: A lead in the models.

560
00:27:47,560 --> 00:27:51,119
Speaker 2: This is the Bloomberg Survandans podcast, bringing you the best

561
00:27:51,119 --> 00:27:54,440
Speaker 2: in markets, economics, antient politics. You can watch the show

562
00:27:54,520 --> 00:27:57,439
Speaker 2: live on Bloomberg TV weekday mornings from six am to

563
00:27:57,600 --> 00:28:01,320
Speaker 2: nine am Eastern. Subscribe to the podcast on Apple, Spotify,

564
00:28:01,480 --> 00:28:03,720
Speaker 2: or anywhere else you listen, and as always, on the

565
00:28:03,720 --> 00:28:10,680
Speaker 2: Bloomberg Terminal and the Bloomberg Business app hmm